Okay, we've spent a few weeks looking at the major behavioral biases that impact our investing

and our wealth building.

So let's round things off with just three more.

Yes, confirmation bias.

I want to just round things off here with just three more

behavioral biases that we bring to bear on our investing which can be an insidious

threat to our wealth-building success. I'm going to go over these in fairly rapid-fire

fashion so let's put five minutes on the clock down here.

Say a quick thank you to my friends at 7 Investment Management down here for continuing to sponsor the show, and let's crack on.

First up, we have overconfidence bias. This is closely linked to self-attribution bias of course and it means that we can

overestimate our judgment or the quality of the information we have. Maybe we think we can predict downturns and rallies in stock markets.

Or that we have some kind of advantage

because of a tip that we got from somebody in the know.

What this tends to lead to is over trading because we're constantly trying to

realign our actually very unpredictable portfolio to whatever our views are right now

and the cost of that over trading can eat into future returns

probably won't lead to additional returns to cover the cost of the trading not just

in dealing fees but also for being out of the market as you are making switches between

holdings. Overconfidence bias also leads us to forget when we got things wrong

convenient really. Next up loss aversion bias. Now there's a famous study by Kahneman and Tversky which

show that people feel the pain of loss roughly twice as much as they feel the

pleasure of an equivalent sized gain.

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